You might struggle to recognise it in my columns, but I'm a fan of Gordon Brown, whose achievement in presiding over such a long period of stability in the UK economy is a considerable one. As many commentators have observed, this may be as much down to conducive conditions in the world economy and the legacy of labour and capital market flexibility inherited from the Thatcher years as his own policies. Yet in economics, perhaps the best that can be expected of a politician is simply that he doesn't mess things up. So far, Mr Brown hasn't.
Yet there are plenty of things the Chancellor is getting wrong, as the growing chorus of complaint from business bears out. Pensions policy, where political rivalry seems to oblige Mr Brown to hold the opposite view to the Prime Minister regardless of the merits of the argument, may be another of them.
As we reported on these pages last week, the pensions White Paper is now delayed until the summer at the earliest as a result of Treasury obstruction. If Mr Brown gets his way, its conclusions and recommendations will be anodyne and irrelevant.
Without a change of heart, radical proposals from Lord Turner's Pensions Commission to restore the earnings link to the state pension and set up a new national pensions savings scheme will be kicked into the long grass or rejected outright. This is despite the fact that the Prime Minister and his Work and Pensions Secretary, John Hutton, are known to be sympathetic. Lord Turner is due to respond to his critics today, but as things stand, he cannot be hopeful of success.
To the extent that the Chancellor's misgivings are based on rational analysis, rather than simply a desire to thwart the Prime Minister, they are twofold in nature. The first lies with cost. Raising the basic state pension until it matches the present, means-tested, minimum income guarantee, and indexing it to earnings rather than inflation, would be an extraordinarily costly exercise, even when largely paid for by gradually lifting the age of entitlement beyond the present 65.
The Chancellor fears for the political consequences both of raising the age of entitlement and the pressure on the public finances caused by turning the minimum income guarantee into a universal state pension. Better, in his view, just to keep muddling along with the means-tested pensions credit approach, which he introduced back in the late 1990s and has championed as a way of reducing pensioner poverty.
So here's the second of Mr Brown's objections: the means-tested, minimum income guarantee is simply a better and more socially equitable way of addressing the problem. Those who have no pensions are assured a basic, albeit derisory, standard of living, while the middle classes can take care of themselves.
Never mind that means-tested benefit has virtually destroyed the incentive to save among lower and middle income groups. Indeed, so many pensioners are forecast to be falling back on benefit within a generation or two that the Turner proposals may end up largely implemented by the back door in any case.
These forecasts may, of course, be bunkum. Rising household wealth, together with now easily accessible forms of equity release, give some reason to believe they are. What's more, Lord Turner's insistence that his reforms can be implemented at only marginal extra cost to the Treasury in the short to medium term depend not just on raising the age of entitlement, but also on reinvesting back into the pensions pot the savings derived when women's state pension age is equalised with that of men.
The Chancellor has other plans for that money, not least the recently stated aspiration of raising the amount spent per pupil in state schools to the £8,000 average enjoyed by the independent sector. Mr Brown's opposition to the other half of Lord Turner's proposals - the national pensions savings scheme - is less entrenched, yet the NPSS only really works as an adjunct to a better basic state pension. If means testing persists, many low-income earners won't find it worth saving into the NPSS.
While ministers argue, our pensions system is fast disappearing down the drain. Final-salary pensions are already history for all but the public sector. For many, there is nothing to replace them.
Mr Brown's determination to resist any new public sector commitments is understandable. He's already exhausted the limits of his ability to tax the economy further. Anything more would run up against the law of diminishing returns. In his view, the Pensions Commission should never have been allowed to look at the state pension system at all. This is his territory: no one other than the Chancellor determines where public money is spent. Yet other countries, from Australia to New Zealand and Sweden, are successfully addressing the pensions issue: why do we in Britain find it so difficult?
The answer seems to be more with the warring duo at the top of government than anything else. It's spectacle, which seems to infuse all aspects of public policy these days, is increasingly bizarre and dispiriting.
Time Luxembourg gets real
Europe still has a country mile to go in coming to terms with the modern world, to judge by remarks over the weekend from the Luxembourg Prime Minister Jean-Claude Juncker. I should be careful what I say here, for Luxembourg has by far the highest GDP per head of population of any OECD nation; in terms of national wealth, this tiny little country is a soaraway success.
Mr Juncker may therefore be on to something when he insists that hostile takeover bids should be disallowed within the European Union. Luxembourg seems to have done very nicely for itself without the galvanising power of unfettered free markets.
Yet in making his remark about the European Union as a whole, it is as if he lives in a bygone age. "I cannot perceive why there must be hostile takeovers within the EU," Mr Juncker was quoted as saying. "In a mature economic democracy such as the EU, it must be possible to bring about mergers through negotiation if they are justified rationally."
Yet if the markets are to be denied the opportunity to decide on what's "rational", then who? We can only assume Mr Juncker means himself and other elected politicians. In making this argument, Mr Juncker looks back to a time when governments still occupied the commanding heights of their economies, a time of closed borders and incestuous interplay between the higher echelons of business and politics.
This is the same argument that encourages the creation of "national champions" as a way of supposedly shielding economies from the full impact of global competition. Yet in seeking to safeguard the old, Europe only shuts out the new. In seeking to protect those in employment, it only disadvantages those without such rights - the unemployed. And in seeking to ring fence established forms of wealth, it only prevents the creation of new ones.
Luxembourg wants to stop Mittal Steel from buying Arcelor, even though it's hard to see any obvious industrial argument against the deal.
The European Commission's determination to crack down on anti-competitive practice in gas and electricity markets demonstrates a willingness to change. Yet it is proving mighty difficult to shift the mindset which seeks to discourage competition rather than embrace it. By the time Europeans realise the damage this approach is doing to them, it may already be too late.Reuse content